Economy

‘Companies abuse Dutch tax deal with Uganda’

De Volkskrant writes this on Friday based on its own research.

International companies can avoid tax in Uganda through a special tax treaty that the Netherlands made with the country in 2004. As a result, Dutch companies, just like Ugandan companies, do not have to pay dividend tax in Uganda.

15 percent tax avoidance

As a result, all kinds of foreign companies that do business in Uganda, settle in the Netherlands to make use of this tax deal. As a result, they do not have to pay the standard rate of 15 percent tax on profit distributions.

The tax agreements were set up in the past to lure investors to Uganda. The idea was that this economic impulse would more than compensate for the lost tax revenues. But the practice is different: multinationals that want to invest in Uganda prefer to do so via the Netherlands.

The Netherlands is the largest investor in Uganda on paper, but researchers from aid organization Oxfam Novib estimate that 95 percent of these investments come from third countries.

Mailbox company in Amsterdam

An example cited by the newspaper is telecom company Airtel. According to the newspaper, the company from India had already decided to start in Uganda when it registered a holding in the Netherlands in 2010.

Once Airtel made a profit and started paying out dividends, it ran via Overschiestraat 65 in Amsterdam, a letterbox company that uses Airtel for more than ten African countries. The company says in a response that it complies with tax laws.

An argument that is almost standard for companies that avoid tax. For example, we recently heard the British tobacco manufacturer BAT say exactly the same in a heated tax dispute with the Dutch tax authorities.

More companies are benefiting

As long as the Ugandan divendend tax rate remains at 0 percent, there is a good chance that more companies will benefit from the Dutch tax route. For example, the Chinese state-owned CNOOC and the French energy company Total will drill for oil in Uganda. According to Oxfam Novib, the country could lose up to 241 million euros.

On December 10, the House of Representatives will debate the tax deal with Uganda.

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